LONDON (Reuters) - British motor insurer Admiral (>> Admiral Group plc) posted a slim but forecast-beating one percent rise in first-half pre-tax profits on Wednesday, helped by growing customer numbers and the release of reserves held against future claims.
The profit of 186.1 million pounds ($291.6 million) came in above analysts' expectations of 163 million pounds, according to a company-supplied consensus forecast, driving Admiral's shares 3 percent higher by 0730 GMT.
Admiral's profits from its UK car insurance business, which provides around 80 percent of its customers, rose 6 percent, mainly as a result of higher releases of reserves set aside to cover the cost of future claims.
Britain's banking and insurance regulator has warned motor and home insurers about the risks of drawing on the reserves they have built up against future claims to boost profits.
Admiral said a positive claims environment meant it was likely to release more reserves in future.
Geraint Jones, Admiral's chief financial officer, told Reuters that the insurer had more than enough reserves.
"Our history shows we are a cautious reserver," adding in a telephone interview that large reserve releases for the insurer were "not particularly unusual".
JP Morgan Cazenove analysts reiterated their underweight rating on the stock, saying that the level of reserve releases "is not sustainable".
The firm's combined ratio fell to 82.7 percent, from 85.1 percent a year earlier.
The combined ratio weighs the amount of money taken in as premiums against that paid out for claims and costs. A level below 100 percent indicates a profit.
Admiral competes with UK rivals including RSA (>> RSA Insurance Group plc), Direct Line (>> Direct Line Insurance Group PLC) and esure Group (>> Esure Group PLC).
Admiral owns UK price comparison site Confused.com and U.S. site compare.com. Its other brands include Elephant, Diamond and Bell.
Jones said Admiral would be looking to expand price comparison sites into international markets, adding that the price comparison model was "quicker to get off the ground" than conventional motor insurance.
Admiral announced earlier this year that chief executive and founder Henry Engelhardt would step down next year, to be replaced by co-founder and current Chief Operating Officer, David Stevens.
Engelhardt will continue to have a role in the company though the exact position was still being worked out, Jones said.
Admiral said it would pay an interim dividend of 51 pence per share, against analyst forecasts of 45.6 pence.
($1 = 0.6382 pounds)
(Reporting by Carolyn Cohn; Editing by Keith Weir)